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Diaz v. M&M Louie Holdings

July 20, 2010


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6304-07.

Per curiam.


Submitted: May 19, 2010

Before Judges C.L. Miniman and Waugh.

Third-party defendant Headwear Creations, Inc. (the tenant), appeals from a December 19, 2008, order requiring it to defend and indemnify third-party plaintiff M&M Louie Holdings, LLC (the landlord), with respect to all claims made by plaintiff Rafael Diaz, an employee of the tenant, arising from a May 26, 2006, defective condition in the parking lot for the premises leased in part to the tenant. Because the October 1, 1996, lease*fn1 did not specify that the tenant would defend and indemnify the landlord with respect to the landlord's own negligence, Azurak v. Corporate Property Investors, 175 N.J. 110, 112-13 (2003), we now reverse.

An abandoned well was under the landlord's paved parking lot, and on or before May 26, 2006, the well cover became dislodged. Plaintiff, accustomed to traversing the lot, failed to notice the uncovered well and stepped into it. He suffered a serious knee injury. Plaintiff filed suit on August 3, 2007. The landlord and its principals, Michael Kukoff and Jay Kukoff (the Kukoffs), answered the complaint on October 3, 2007, and cross-claimed against defendant Kukoff Industries, Inc., the landlord named on the lease, for contribution and indemnification.

On November 9, 2007, the landlord and the Kukoffs filed a third-party complaint against the tenant, alleging that the tenant agreed in the lease to hold them harmless and indemnify them "for any and all claims such as that of the plaintiff that may be made against them." In addition, they alleged that the tenant had breached the lease by failing to procure liability insurance naming the landlord and the Kukoffs as additional insureds and asserted that they were damaged as a result. The third-party complaint was served on December 19, 2007.

The leased premises were "APPROXIMATELY 11,000 SQUARE FEET IN THE TOP FLOOR OF THE BUILDING LOCATED AT 200 WRIGHT STREET, NEWARK, NJ, PLUS THE EXISTING TRAILER WITH PARKING FOR TRAILER AND TENANT[']S EMPLOYEES."*fn2 The lease was between the tenant and defendant Kukoff Industries, Inc., as the landlord.*fn3 Paragraph twenty-seven of the lease provided:

The Tenant, at Tenant's own cost and expense, shall obtain or provide and keep in full force for the benefit of the Landlord and Tenant during the term hereof, general public liability insurance, insuring the Landlord and Tenant against any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise in or about the leased premises, for injuries to any person or persons, for limits of not less than $1,000,000.00 for injuries to one person and $1,000,000.00 for injuries to more than one person, in any one accident or occurrence, and for loss or damage to the property of any person or persons, for not less than $50,000.00. . . . The Tenant also agrees to and shall save, hold and keep harmless and indemnify the Landlord from and for any and all payments, expenses, costs, attorney fees and from and for any and all claims and liability for losses or damage to property or injuries to persons occasioned wholly or in part by or resulting from any acts or omissions by the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors or for any cause or reason whatsoever arising out of or by reason of the occupancy by the Tenant and the conduct of the Tenant's business. . . .

The insurance policy procured by the tenant that covered the date of plaintiff's accident listed defendant Kukoff Industries, Inc., as the additional insured; it complied with the requisite level of coverage.*fn4

When no answer was forthcoming from the tenant, the landlord and the Kukoffs sought entry of default on February 20, 2008. This provoked the tenant's answer on March 19, 2008. During discovery, Rubin Spitz, the tenant's owner, testified that his business had occupied the landlord's premises since 1987. He identified the lease effective on October 1, 1996, between defendant Kukoff Industries, Inc., and his company. He stated he had not read the lease, but turned it over to his accountant to review and implement. His wife, who was the president at the time, signed the lease and the rider to it. He believed the 1996 five-year lease had been renewed for another five years.

Defendant Jay Kukoff testified there must have been a renewal of the 1996 lease, because Spitz "has been a tenant for so long." He also testified that the tenant always made the check payable to M&M Louie "for the last, got to be, I don't know, ten years maybe, if I'm right, I could be wrong, but they've always paid M&M Louie and it's always been known that, you know, it's M&M Louie that they're leasing the property from." He admitted he could not locate the lease in effect on the date of the accident.

Discovery ended on November 12, 2008, and the tenant moved on November 17, 2008, to dismiss the third-party complaint with prejudice. The landlord and the Kukoffs cross-moved for summary judgment seeking reformation of the lease and an order compelling the tenant to indemnify them with respect to plaintiff's claims.*fn5

The motions were argued on December 19, 2008. The judge clearly had a greater record before him than has been provided to us based on his description of the facts and the parties' arguments:

And what brings this to court, it looks like Jay Kukoff . . . testified that, in reality Kukoff Industries really wasn't even in business any longer, and he related that 200 [Wright] Street [was], basically, owned by him, and his brother in a couple of different names, and corporate entities, but it was really owned by M&M Louie Holdings since well before the accident date, and before the policy really came into effect back in 1987, which was prior to the dating, and execution of the [tenant's] lease.

M&M Louie Holdings was thus, in their opinion, the true owner of the property on the date that [plaintiff] fell.

The tenant['s] . . . position is that the third[-]party complaint against the third[-]party defendant is improper . . . because M&M Louie Holdings never entered . . . the lease agreement. They don't have any standing, and the lease, basically, was with Kukoff Industries, and that there are no contractual rights that bind the parties, and that's what they file in their motion, and that, accordingly, that the third[-] party plaintiffs have no right to a defense, and an indemnification at this point from [the tenant].

And then we had a motion from the Kukoff brothers, and M&M Louie, and it says that the lease contained a provision requiring [the tenant] to insure the landlord without spelling out who the landlord was.

[T]he was the . . . definitive word, landlord, and hold the landlord harmless, and indemnify the landlord for any cause, or reason whatsoever arising out of -- or by reason of the occupancy by the tenant, and the conduct of the tenant's business, and if valid this clause would apply here as the plaintiff was an employee of [the tenant] who got hurt ...

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